Illustration: Aïda Amer/Axios

The corporate debt market is beginning to follow the public equity market's lead in decoupling from the real economy.

Why it matters: Private equity and its lenders spent 2009 staring into the abyss. In 2020, they're just pretending it doesn't exist.

Driving the news: KKR reportedly is prepping a $2.75 billion dividend recap for Epicor Software, a portfolio company it tried and failed to sell last year. It would be the first such deal since before the pandemic began.

  • The argument for this deal is that KKR has cut Epicor's leverage load since acquiring it from Apax Partners in 2016, and that it has strong recurring revenue and cash flow.
  • The argument against this deal is that Epicor is selling enterprise software in the midst of a severe recession, with a particular focus on retail, manufacturing and distribution. It's one thing to keep the ship steady, it's quite another to encumber it with new debt.

The big picture: Overall credit conditions have steadily improved since March, thanks in large part to Fed backstops.

  • Private equity execs tell me that high equity prices, not debt availability or terms, is their stumbling block for new deals. As one explained: "The banks obviously know there's a pandemic, but you wouldn't know it when you talk to them about financing a new deal."
  • Defaults and bankruptcies have steadily increased since March, but much of that has been siloed in particularly hard-hit industries (retail, hospitality/leisure) or for companies that were already struggling.
  • Overall, the percentage of corporate bonds trading at distressed rates has fallen from more than 30% in March to 12.7% in June.
  • Within the leveraged loan market specifically, the current default rate is at less than one-third of its 2009 financial crisis peak.

Go deeper

The continued rise of retail stock trading

Data: The Block; Chart: Danielle Alberti/Axios

Small investors are playing a larger role in the stock market than at any time this century.

The big picture: Whatever the reason for small investors' rise — lots of free time thanks to the pandemic, zero-dollar commissions, addictive and gamified apps, enticing volatility — retail investors have become a driving force behind many individual stocks and maybe even the market as a whole.

A quandary for state unemployment agencies

Illustration: Aïda Amer/Axios

State agencies charged with paying unemployment benefits to jobless residents have their backs against the wall as they rush to parse President Trump's executive actions on coronavirus aid.

Why it matters: States are being asked to pitch in $100 per unemployed resident, but it’s a heavy lift for cash-strapped states that are still unclear about the details and may not opt-in at all. It leaves the states and jobless residents in a state of limbo.

Updated 43 mins ago - Health

New Zealand reports first local coronavirus cases for 102 days

Prime Minister Jacinda Ardern after a press conference at Parliament on July 22 in Wellington, New Zealand. Photo: Hagen Hopkins/Getty Images

AUCKLAND, New Zealand — Auckland is locking down and the rest of New Zealand faces lesser restrictions for 72 hours after a family of four tested positive for COVID-19, Prime Minister Jacinda Ardern announced Tuesday.

Why it matters: It's the first cases not in managed isolation for 102 days, Ardern said at a news briefing.